Nakayama Steel to ask its creditors for over ¥50 billion in debt waivers

JIJI

Nakayama Steel Works Ltd. plans to ask about 40 of its creditor banks to forgive its debts so it can engineer a turnaround, it was learned Thursday.

Of about ¥100 billion in outstanding interest-bearing debt owed by the Osaka-based company, over ¥50 billion could be forgiven, sources said.

Nakayama Steel has already asked Nippon Steel & Sumitomo Metal Corp., its largest shareholder for a fresh capital injection as part of the turnaround effort, the sources said. Nippon Steel & Sumitomo Metal, the nation’s largest steelmaker, had a 9.8 percent stake in Nakayama at the end of September and is considering the request, the sources said.

Nakayama Steel is also considering asking Enterprise Turnaround Initiative Corp. of Japan, a public-private business entity often tasked with handling corporate rehabilitations, to acquire some of the creditors’ claims.

Nakayama Steel and its major creditor banks hope to wrap up the company’s comeback bid by the end of December.

The steelmaker’s earnings have been hit hard by the strong yen and sluggish domestic demand. It has posted three consecutive years of consolidated net losses through March 2012.

Sweeping reconstruction measures are needed because the electric furnace steelmaker’s earnings are expected to decline further as electricity prices climb as a result of the Fukushima disaster.

Nakayama Steel shut down a blast furnace in 2002 and halted production at a converter shop and a steel plate mill in Osaka later. At the end of October, it had slashed its payroll to about 500 employees from some 900 at the end of March 2010.

The company hopes to achieve a turnaround by strengthening its capital and business partnership with Nippon Steel & Sumitomo Metal, to which it outsources steel plate production.